Abstract:
Check is a negotiable instrument which is widely used replacing cash. Drawees honor checks
and effect payment if it, inter alia, fulfills the formality requirement that is provided under the
law and the drawer has sufficient cover during issuing/presenting the check in his/her
account. Be that as it may, a drawer may not have sufficient cover while a payee/holder
presents a check for payment. In this regard, while the Geneva Uniform Law of check offers a
right for Contracting States to set the consequence and remedies of such act under their
national law, the French and UK check laws vividly provides an obligation on drawees to
honor checks which are drawn without having sufficient cover, and effect payment to the
extent of the fund available in the drawer’s account. Additionally, they also criminalize the
act of drawing a check without having sufficient cover. This research, accordingly,
investigates the legal and practical problems associated with drawing check without having
sufficient cover under the Ethiopian legal system, with a specific focus on the practice in the
commercial bank of Ethiopia (here in after CBE). While the primary sources of data is
acquired from key informant interviewees i.e. employees and managers of East, West, North,
South and head office of the CBE, senior legal expert of the NBE and commercial bench judge
of the FFIC, secondary sources of data is acquired from different published and unpublished
sources. The finding of the research is that the Licensing and Check Account Operation
Directive without incorporating relevant provisions that order drawees to honor a check to
the extent of the fund available in the drawer’s account as per art. 859 (3) and (4) of the
commercial code, it has negatively affected rights of payees and holders of check of the CBE
through deterring them from making use of an already accessible fund and through making
them to pay a court fee and engage in a litigation on an already admitted and destined fund.
Moreover, it has also forced them to submit their case to a court of a higher jurisdiction, and
as such compromised their appeal right which the country shall consider forthwith.
